Sales Broker Sentenced In Manhattan Federal Court To Two Years In Prison For Fraudulent Mark-Up Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, today announced that BENJAMIN CHOUCHANE, a former sales broker, was sentenced in Manhattan federal court to two years in prison on charges of conspiracy to commit securities fraud and wire fraud. CHOUCHANE – along with Marek Leszczynski and Henry Condron – defrauded clients out of millions of dollars by misrepresenting the prices at which securities were bought and sold. In doing so, the brokerage firm for which they worked earned illegitimate and illegal trading profits, and CHOUCHANE, Leszczynski, and Condron were awarded lucrative bonuses. CHOUCHANE pled guilty to conspiracy to commit securities fraud and wire fraud in June 2013, and was sentenced today by U.S. District Judge John F. Keenan.
Manhattan U.S. Attorney Preet Bharara said: “Benjamin Chouchane misrepresented the price of trade executions in order to make illegal profits for his firm and to increase his own bonus. With his sentence today, he joins the ranks of disgraced professionals to be punished for abusing the trust of clients.”
According to the Complaint, Indictment, statements made during CHOUCHANE’s guilty plea, and other court documents:
From 2005 through November 2010, CHOUCHANE, Leszczynski, and Condron worked at a broker-dealer that was headquartered in London, England, with offices in major cities in Europe, Asia, and the United States (“Broker-Dealer 1”). Among other services offered, Broker-Dealer 1 bought and sold securities on behalf of institutional clients, such as commercial banks and investment firms located throughout the United States and in various European cities.
Leszczynski and CHOUCHANE worked as sales brokers for Broker-Dealer 1’s Cash Equity Desk in New York, New York. In that capacity, they were responsible for receiving orders to buy or sell securities from Broker-Dealer 1’s clients, relaying those orders to traders who executed the trades, communicating with clients as their orders were being filled, and sending trading confirmations to the clients that showed the prices at which securities were bought or sold – including any commissions that Broker-Dealer 1 charged. Condron worked as an execution trader and a middle office manager. In that capacity, Condron was responsible for executing buy and sell orders at the instructions of sales brokers, such as Leszczynski and CHOUCHANE, and inputting trading data into Broker-Dealer 1’s bookkeeping system.
From 2005 until December 2008, CHOUCHANE, Leszczynski, and Condron misrepresented the execution prices at which securities were bought and sold. For example, when Broker-Dealer 1 received a buy order from a client, the defendants and their co-conspirators caused the purchase price of the security that would be reported back to the client to be “marked up” from its actual purchase price. Conversely, when Broker-Dealer 1 received a sell order from a client, the defendants and their co-conspirators caused the sale price of the security that would be reported back to the client to be “marked down” from its actual sale price. The difference between the actual execution prices and the false prices reported to clients was hidden from Broker-Dealer 1’s clients, enabling Broker-Dealer 1 to earn millions in trading profits to which it was not entitled. As a result of the fraudulent scheme, CHOUCHANE, Leszczynski, and Condron were paid inflated bonuses.
In addition to the prison term, Judge Keenan sentenced CHOUCHANE, 39, of New York, New York, to two years of supervised release. CHOUCHANE was also ordered to forfeit $5 million, to pay a $100 special assessment fee, and to make restitution in an amount to be fixed at a later date.
Leszczynski, 44, of Miami, Florida, who previously pled guilty to one count of conspiracy to commit securities fraud and wire fraud, is scheduled to be sentenced on December 19, 2013, by Judge Keenan. Condron, 34, of New York, New York, who previously pled guilty to one count of securities fraud and two counts of conspiracy to commit securities fraud, is scheduled to be sentenced on January 16, 2014, by U.S. District Judge Naomi Reice Buchwald.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission for its assistance.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Benjamin Naftalis is in charge of the prosecution.